The mid-term election results appear to match what market participants expected in the days leading up to voting yesterday. We will refrain from political commentary other than to make the observation that there is a difference between “benign gridlock” when the country’s course is essentially sound and gridlock when our fiscal situation is heading for disaster — which to us seems more like a suicide pact than a political strategy. Meanwhile, the Federal Reserve is set to announce the details of its second round of quantitative easing later today. QE2 is essentially a euphemism for printing money, which in our modern economy takes the form of the Federal Reserve buying treasury bonds of intermediate to long term maturities. Read this article for more commentary.
Roger Lowenstein is the author of five books covering financial markets. His latest book, The End of Wall Street, was published in April. Mr. Lowenstein is also the author of an excellent biography on Warren Buffett written in 1995 which we reviewed previously. In an article for the Washington Post today, Mr. Lowenstein makes the case for more timely intervention by the Federal Reserve when financial market bubbles are forming. Read this article for a brief excerpt and more commentary.
Former Federal Reserve Chairman Alan Greenspan testified today in Washington before the Financial Crisis Inquiry Commission. We suggested last week that Mr. Greenspan and others who failed to foresee the crisis should simply accept responsibility and play a role in helping society learn from past mistakes in an effort to prevent similar problems from taking place in the future. While Mr. Greenspan now admits that he was only correct “70 percent of the time”, he continues to minimize the role of monetary policy in the crisis. Read this article for more details and a brief video clip of Jack Bogle’s view of Mr. Greenspan’s testimony.
Kansas City Federal Reserve President Thomas M. Hoenig has been a voice in the wilderness for some time. Mr. Hoenig was the only dissenter of the policy action at the January meeting of the Federal Open Market Committee because he believes that economic and financial conditions no longer warrant the Federal Reserve’s commitment to keep the federal funds rate at “exceptionally low” levels for an extended period of time. Last year, Mr. Hoenig gave a speech outlining alternatives to the “too big to fail” doctrine that has become conventional wisdom in Washington. Read this article for Mr. Hoenig’s current views and a link to a recent speech.